Audited CLF Statements Reveal Gutted Fund Post-U.S. Central

As expected, the NCUA’s Central Liquidity Facility audited financial statements reveal the liquidation of U.S. Central credit union exponentially shrunk the agency’s ability to fund industry liquidity needs. The CLF closed out 2012 with just $111.5 million in assets, down from more than $2 billion one year earlier.

The CLF financial reports were included in an NCUA audit release on Tuesday, in which the regulator reported receiving unqualified, or “clean”, audit opinions for 2012 in four areas: the CLF, Operating Fund, National Credit Union Share Insurance Fund and the Community Development Revolving Loan Fund.

“Diligent stewardship of our funds and public transparency are both top priorities for the agency,” NCUA Board Chairman Debbie Matz said. “Independent auditors have completed the audits of the financial statements for our four permanent funds. Their clean opinions lead me to say with full confidence that we have fully lived up to our commitments to credit unions, credit union members and their communities.”

The CLF reports also reveal that while the value of capital shares for regular members has increased from $64.4 million as of Dec. 31, 2011 to $80.5 million as of Dec. 31, 2012, credit unions investing capital in the fund on their own haven’t even begun to cover the nearly $2 billion that had been invested by agent members – U.S. Central and other corporates – on behalf of member credit unions.

The shrinkage has, in turn, reduced the CLF’s ability to borrow from the Treasury.

“CLF is authorized to borrow, from any source, an amount not to exceed 12 times its subscribed capital stock and surplus,” the report said. “As of Dec. 31, 2012 and 2011, CLF’s statutory borrowing authority was $2.3 billion and $49.8 billion, respectively.”

An NCUA proposed liquidity rule would require all federally insured credit unions with more than $100 million in assets to either capitalize membership in the CLF or set up a Federal Reserve Discount Window account to serve as liquidity backups in the event of a systemic liquidity crunch.

As in past years, the Temporary Corporate Credit Union Stabilization Fund audit is not yet complete. Accounting firm KPMG LLP completed the audits of all four permanent funds and will issue the corporate stabilization audit report “in coming months” the NCUA said.

“We are pleased that NCUA has received clean audits for the four funds,” said NAFCU President/CEO Fred Becker. “We continue to push for transparency in regards to the methodology as to NCUA’s reserving and look to the speedy release of the stabilization fund audit.”